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The Lighthouse is the weekly email newsletter of the Independent Institute.
Subscribe now, or browse Back Issues.

Volume 15, Issue 39: September 24, 2013

  1. Admitting More Foreign Workers Would Improve U.S. Job Growth and Wages
  2. Making College Affordable
  3. Syria and the Imperial Presidency
  4. What’s Hampering Economic Recovery and Job Growth?
  5. New Blog Posts
  6. Selected News Alerts

The Independent Review: Subscribe or renew today and get a free copy of the 25th Anniversary Edition of Crisis and Levithan: Critical Episodes in the Growth of American Government, by Robert Higgs.


1) Admitting More Foreign Workers Would Improve U.S. Job Growth and Wages

Many Americans worry that allowing more foreign workers into the United States would reduce wages, but a new study by two economists at the Independent Institute argues that the opposite is true: Increasing the number of non-U.S. workers in the U.S. labor market would contribute to higher wages for the native-born population. “Immigrants who add to the supply of labor also demand goods and services, causing the demand for labor to rise,” write Senior Fellow Benjamin Powell and Research Fellow Zachary Gochenour, the study’s authors.

Foreign workers help increase the real wages of the native population not only because of their saving and spending habits, but also because they contribute to greater specialization and a more extensive division of labor. This improves the productivity of the entire workforce, helping to drive down prices and increase real wages. Powell and Gochenour estimate that immigrants and foreign workers in the U.S. labor market create net benefits for the native-born population worth at least $41 billion a year—a gain that would be much larger if the supply of foreign-born workers were not restricted by arbitrary federal caps. Although those caps would begin to increase under the immigration reform bill passed recently by the U.S. Senate (S. 744), that legislation doesn’t go far enough in allowing the supply of foreign workers to keep up with demand by American firms, according to Powell and Gochenour.

A much better proposal, called Red Card, would rely more on market forces to balance the quantity and distribution of guest workers across industries and geographic regions—and without offering foreign workers a controversial “pathway to citizenship.” Even better and more market-friendly, according to Powell and Gochenour, would be a U.S. policy of free immigration and virtually open borders, as characterized the United States before 1875. After enacting such a policy Washington would have the moral stature to request other countries to do the same. “The economic gains associated with adopting this policy truly could be enormous: a 2011 study estimated a one-time gain to world GDP of 50 to 150 percent if a free immigration policy were adopted worldwide,” Powell and Gochenour write.

Broken Borders: Government, Foreign-Born Workers, and the U.S. Economy, by Benjamin W. Powell and Zachary Gochenour (Independent Policy Report, 9/16/13)

Guest Worker Quotas ‘Disproportionately’ Hurt Small Businesses (MMD Newswire, 9/20/13)

Global Crossings: Immigration, Civilization, and America, by Alvaro Vargas Llosa

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2) Making College Affordable

The United States spends far more of its national income on higher education than does the rest of the developed world—about twice as much. But no one would claim that American college students receive an education that is somehow twice as good as those of their peers in other leading industrialized countries. College costs keep climbing, but students have only more debt to show for it. President Obama has recently announced a new plan to make college more affordable, but according to Independent Institute Research Fellow Vicki E. Alger, he has completely misdiagnosed the malady.

The problem of rising college costs isn’t caused by students’ and parents’ lack of information about which institutions would give them the best education for their dollar. It’s caused mainly by more and more federal financial aid going toward overhead and administrative bloat. If that money had instead gone toward making college affordable, a four-year degree would cost an estimated $3,500 less.

“This situation will likely worsen if new mandates are enacted under Obama’s college rating system, since additional federal financial aid compliance officers will be required to track students long after they’ve graduated,” Alger writes. College students and their parents would be better off if federal aid were phased out and the savings returned to taxpayers so that they could put the money in tax-free funds to pay for college. Alger suggests that this would also “encourage private sector work-study contracts so students can earn degrees without the debt or job uncertainty current graduates face.”

Obama’s College Affordability Scheme Gets an ‘F’, by Vicki E. Alger (Washington Examiner, 9/7/13)

Health and Higher Education, by John C. Goodman (The Beacon, 8/27/13)

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3) Syria and the Imperial Presidency

Barack Obama’s threats of military action against Bashar al-Assad’s regime won’t win the hearts and minds of Americans who want Washington to pursue a foreign policy of prudent non-intervention. But at least the President sought congressional approval for a Syrian strike—an approach more in step with the republic’s founders than the unilateral war making that has often characterized the Oval Office, according to Independent Institute Senior Fellow Ivan Eland.

In his latest op-ed, Eland notes that the Constitutional Convention in Philadelphia in 1787 led the founders to reserve for Congress a host of job duties in the realm of foreign policy and military affairs, including the power to declare war. (In an early proposal for the Constitution, only Congress possessed the power to “make war,” but this wording was changed so that the chief executive could repel a sudden attack if Congress were adjourned.) Ultimately the founders gave the presidency only a few tasks related to foreign affairs: the authority to sign treaties, to appoint and receive ambassadors, and to act as commander-in-chief. But the founders’ limits on presidential power have long been under assault by an imperial presidency, especially since Harry Truman got Americans into the Korean War without a congressional declaration. Obama’s recent war on Libya followed that long-established pattern.

Obama’s attempts to win the approval of Congress—even efforts to enlist Vladimir Putin—don’t guarantee that the President won’t change his mind and launch unauthorized airstrikes against Syria. “John Kerry has said that even with limited military strikes on Syria, the administration was not ‘going to war’ with that country, perhaps implying that only ‘wars’ need congressional approval,” Eland writes. “Certainly the Syrians at the business end of sea-launched cruise missiles or aircraft-delivered bombs or missiles would think a war was going on. And so would have the nation’s founders.”

Syria War Wariness Should Remain, by Ivan Eland

No War for Oil: U.S. Dependency and the Middle East, by Ivan Eland

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4) What’s Hampering Economic Recovery and Job Growth?

Economic prognosticators often go to great lengths trying to decode the hidden meaning of various data and statistics. Their efforts usually fail. But the attempt to make sense of the economic world by looking for revealing numbers is not inherently futile—not if the truth seeker isn’t trying to predict the precise magnitude of future growth rates, prices, or interest rates. In fact, one economic indicator truly worthy of that name is essential for understanding why the current recovery has been so sluggish: net private investment, i.e., business spending that increases the stock of physical capital and improves the economy’s ability to produce. Independent Institute Senior Fellow Robert Higgs explains.

“My own view is broadly Austrian, which leads me to concentrate my analysis on net private investment as the key variable in explaining aggregate booms and busts,” Higgs writes in the Fall 2013 issue of The Independent Review. And this analysis shows that net private investment in 2012 was significantly below its recent, pre-recession peak in 2007—41 percent lower! “The weakness of this investment recovery,” Higgs continues, “surely plays a key role in explaining why output recovery has been so slow and employment recovery even slower in recent years.”

This raises an obvious question: Why haven’t business leaders resumed their normal levels of spending on capital equipment and the like? They possess the ability but lack the willingness. Their skittishness, Higgs suggests here and argues at length elsewhere, is caused largely by uncertainties regarding a host of public policies—including Obamacare, the Dodd-Frank financial industry reforms, federal fiscal mismanagement, and the Federal Reserve’s quantitative-easing shell game. Until lawmakers and bureaucrats take significant steps to lift these uncertainties, the big money will watch cautiously from the economy’s sidelines, and growth in output and job creation will continue to suffer.

The Sluggish Recovery of Real Net Domestic Private Business Investment, by Robert Higgs (The Independent Review, Fall 2013)

The Independent Review (Fall 2013)

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Subscribe to The Independent Review. Respond to this subscription offer and receive a free copy of the 25th Anniversary Edition of Crisis and Leviathan: Critical Episodes in the Growth of American Government, by Robert Higgs!

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5) New Blog Posts

From The Beacon:

From MyGovCost News & Blog:

SNAP, Crackle, Fraud
K. Lloyd Billingsley (9/23/13)

The National Debt Made Simple (Presidential Edition)
Mary Theroux (9/21/13)

Another Federal Stimulus Bust
K. Lloyd Billingsley (9/20/13)

The Parable of the Tulips
Burt Abrams (9/19/13)

“Raising the Debt Ceiling... Does Not Increase Our Debt”
Craig Eyermann (9/19/13)

Government Protects Child Abusers
K. Lloyd Billingsley (9/18/13)

Likely Voters Favor Spending Cuts
Craig Eyermann (9/17/13)

You can find the Independent Institute’s Spanish-language website here and blog here.

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6) Selected News Alerts

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